Abu Dhabi's first construction court

Arbitration is becoming more popular as a means of deciding construction disputes in Abu Dhabi, but the emirate hopes to change that by establishing the Gulf's first construction court. Will it work?

Abu Dhabi, largest of the United Arab Emirates' seven kingdoms, has been busying itself with judicial reform. Last October, it appointed the UAE's first female judge. Next, it wants to push judicial expertise, so it plans to set up specialised courts. Here's what it will mean for the emirate's construction industry.

First, the context. Under the UAE's constitution, each emirate has the choice of joining the federal legal system or maintaining an independent court structure. Sharjah, Umm al Quwain, Ajman and Fujairah are part of the federal structure. Abu Dhabi, Dubai and Ras al Khaimah opted to have their own system.

At present, construction claims in Abu Dhabi are dealt with by its regular civil judiciary, which adjudicates on a wide range of civil law matters. However, it will soon be the first Middle Eastern jurisdiction with a specialist construction court applying local law, beating the Dubai International Financial Centre (DIFC), which is planning to establish a court based on the Technology and Construction Court (TCC).

Abu Dhabi's new court is unlikely to have a shortage of work. The industry has proved resilient in the global financial crisis, aided by substantial government spending on infrastructure works and by a recovery in oil prices - Abu Dhabi holds more than 90% of the UAE's crude reserves.

Some of the mega projects it is committed to include Masdar City, which will be the world's first eco-city, while Saadiyat Island will house the Louvre, Guggenheim and Zayed museums. Abu Dhabi intends to diversify an economy still reliant on fossil fuels by establishing itself as a financial and cultural hub and it sees the presence of skilled courts as imperative in giving overseas companies confidence to do business there.

The challenge its judiciary department faces in setting up the construction court is that international parties have tended to favour arbitration over courts because arbitrators can offer technical as well as legal expertise. To win them over, it will be essential to demonstrate that it has judges of sufficient calibre.

The court system will have judges with experience of construction matters. As generalists, whether they have enough to deal with technically-complex and high value construction claims is another matter. In the UK the TCC discovered in the wake of the Co-operative vs ICL case that it only took one questionable judgment for its competence to be brought into question. Furthermore, Abu Dhabi must find specialist judges for new courts being established to deal with media, negligence, insurance, clinical negligence, banking and compensation cases.

Where else can suitable judges be found? The courts of the DIFC and the Qatar Financial Centre have recently appointed from the Commonwealth. Abu Dhabi could look outside the UAE's borders.

But it has limited ability to recruit from overseas. Unless the new court is allowed dispensation, it will be governed by the same laws as the emirate's other civil courts. This means judges must be Muslim and, preferably, citizens of the UAE and fluent in Arabic (the official language of court proceedings).

There is the further question whether there will be enough specialist lawyers to go around. Only UAE nationals and certain Arab expatriates may practise in the emirate's courts.

To present a creditable alternative, litigation’s advantages over arbitration must be compelling. It needs to be efficient from a time and cost perspective. On both grounds, the judiciary department has recently taken significant strides.

In the UAE, litigation does enjoy a significant benefit over arbitration in relation to enforcement. To become final and enforceable, the arbitral award must be "authenticated" which involves progressing through the three-tier court system. A court judgment, on the other hand, is immediately enforceable.

For the construction court, the answer to these challenges may simply be to sit tight. It is unlikely to be overwhelmed initially since acceptance of the new court will probably be gradual, with the public sector leading the way. When statutory adjudication was first introduced in the UK, it took a while for the trickle of referrals to become a flood as most in the industry waited for others to test the waters.

This gives time to find personnel meeting the necessary criteria and for procedure in the specialist court to be fine-tuned. Recent rises in judges' remuneration and training given by the Academy of Judicial Studies & Specialised Training, which educates the emirate's judiciary, will assist.

With the regular announcement of bold new projects being planned in Abu Dhabi, it's sometimes easy to forget the substantial progress which has already taken place since the emirate began exporting oil almost 50 years ago. Backed by serious intent and resources, the emirate's ambition of building a world-class legal system should take a far shorter time to achieve.

Postscript

Francis Ho is a senior associate at international law firm King & Spalding. He can be contacted at fho@kslaw.com